INTERVIEW: Barrick CEO Says Still Looking At Asset Disposals

On Thursday Barrick Gold Corp., the world’s largest gold miner, said it would take a charge of $4.2 billion in the fourth quarter–including a $3.8-billion write-down related to its Lumwana copper mine in Zambia. Barrick and other miners, struggling with lower prices and higher costs, have slashed capital spending plans and reviewed mining-project expansions.

Amid those woes, Jamie Sokalsky took over as Barrick’s chief executive last year, promising to focus less on production growth and more on shareholder returns. In an interview with Canada Real Time, he said he has embarked on a “targeted” but “top to bottom” review of potential assets sales. Barrick has already put on the block its stake in African Barrick Gold PLC, its energy division and a nickel joint venture.

Here are edited excerpts of the interview:

WSJ: As Barrick looks at divestment opportunities, is anything off the table?

Mr. Sokalsky: This is something that ultimately is a targeted approach. We’re looking at all of our assets, but we’ve said that the assets that ultimately are the ones that make sense for us to potentially divest are the ones that are higher cost, shorter life, lower return, low free cash flow generating types of assets. This isn’t about ‘everything is for sale,’ it’s really to optimize the portfolio. We have a core of fantastic, world-class, great assets that ultimately represent huge value for the company.

WSJ: Barrick is the world’s largest gold producer. Is that a title that’s still important?

Mr. Sokalsky: This isn’t about production for production sake… Returns are going to drive production. Production is not going to drive returns. It’s about a higher return. It’s about enhancing shareholder value. It’s not about ounces.

(Barrick’s big charge Thursday was mostly down to higher costs and lower profitability at its Lumwana mine, the crown jewel of its $7.3 billion purchase in 2011 of Eqinox Minerals Ltd.)

WSJ: Do you look back at the 2011 acquisition of Equinox as a mistake?

Mr. Sokalsky: What we have to do is ultimately a lot more work. There is a lot of copper there. The final chapter hasn’t been written on Lumwana as we look forward to see how much more we can potentially reduce costs… It’s easy to say in hindsight we could have done things differently but this is an asset that ultimately we’re going to focus on… (The acquisition) hasn’t worked out as well as we thought but that was a unique opportunity that I think we just have to look at.

WSJ: Any sign that mining costs are starting to ease with the broader commodities cycle and the rate of project cancellations?

Mr. Sokalsky: We’re starting to see a little bit of relief in some areas particularly as the global resource bloom, as some of the pressure on people building projects, has come off. We’ve seen the cancellation of a lot of projects. We’ve cancelled a couple of projects ourselves. Some projects have been finished. Many other companies have either cancelled projects or quite clearly said they are not going to build projects. What that has done is taken some of the heat off pressure on labor rates…I think we’re starting to see that now. We’ll see what happens going forward.

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Canada Real Time provides insight and analysis into what’s making news in Canada, a country punching above its weight on the world stage thanks to its vast resources and strong banking sector. Drawing on the expertise of The Wall Street Journal and Dow Jones Newswires, we take a look at developments in fields ranging from business to politics to culture. You can contact the editors at canadaeditors@dowjones.com